Yandex Investors to Sell Up to $607 Million Stake

March 12 (Bloomberg) -- Yandex NV founders Arkady Volozh
and Ilya Segalovich and shareholders including Baring Vostok
Capital Partners plan to sell as much as $607 million worth of
stock as the growth of Russia’s largest Web-search engine slows.

They are offering investors 24.3 million shares, including
18.2 million from Baring Vostok and 5.1 million from Chief
Executive Officer Volozh, according to a regulatory filing.
Chief Technology Officer Segalovich is selling 0.2 million
shares. Combined, the shares represent 7.4 percent of the
company.

Slowing revenue growth and stiffer competition have left
Yandex’s shares little changed since its initial public offering
two years ago. Global leader Google Inc. has captured about 26
percent of the Russian market, cutting incumbent Yandex’s lead
to 61 percent, according to Liveinternet.ru.

“Founders and early investors are selling out from Yandex
to recoup their investments,” Konstantin Belov, an analyst at
UralSib Capital in Moscow, said by phone today.

Yandex fell as much as 7.6 percent in New York, the biggest
intraday decline since Feb. 19, in anticipation of the secondary
offering, and was down 6.2 percent at 10:18 a.m. at $23.49.

The stock has added 8.8 percent this year and reached the
price of the May 2011 IPO of $25 a share again yesterday,
valuing the company at $8.4 billion. Google has gained 59
percent since the Yandex IPO and has a market value of $274
billion.

Classmate Founders

Volozh and his classmate Segalovich, both programmers,
founded the yandex.ru search engine in 1997. Volozh was valued
at $1.15 billion by Forbes magazine this year.

Yandex said last month its revenue growth may slow to
between 28 percent and 32 percent this year from 44 percent last
year as the Russian Internet market has matured and the growth
of text-based advertising has slowed.

The price for the offering is expected to be determined
today after the market close in New York, according to marketing
documents obtained by Bloomberg News. It’s worth as much as $607
million based on yesterday’s closing price.

The sale is being managed by Morgan Stanley, Deutsche Bank
AG and Goldman Sachs Group Inc., Yandex said in a statement. The
banks will have an option to buy an additional 2.43 million
shares, or 10 percent of the offer size, Yandex said.

Lockup Period

Private-equity funds Baring Vostok and Tiger Global
Management LLC were the largest investors in Yandex before its
$1.3 billion IPO in 2011, and have been selling shares in the
market since then, said Alexander Vengranovich, analyst at
Otkritie Capital in Moscow. Baring is selling as the lockup
period after its previous sale in September expired last week,
he said.

Baring Vostok, which started investing in Yandex in 2000,
had a 16 percent stake as of Dec. 31, while Volozh owned 12.2
percent, Tiger Global 4.7 percent and Segalovich 2.6 percent,
according to Yandex. Free float is about 54 percent. After the
sale, Baring’s stake will fall below the CEO’s holding,
according to JPMorgan & Chase Co.

The Yandex shareholders’ sale resembles the secondary
offering of Russian social-network and online-game operator
Mail.ru Group Ltd., in which billionaire Alisher Usmanov’s USM
Holdings Ltd. sold $532 million of shares last month, Belov
said.

Yandex said yesterday its board approved a program to
repurchase as much as 12 million shares through Nov. 14. Yandex
had about $895 million of cash and cash equivalents on its
balance sheet as of Dec. 31.